Intel's Huge Bet Turns Iffy

By JOHN MARKOFF and STEVE LOHR

Published: September 29, 2002

GOOGLE — the Internet's leading search engine, powered by an arsenal of computers with 15,000 microprocessors — should be a premier customer for Intel's new Itanium 2 super-chip.

Itanium, a joint project of Intel and Hewlett-Packard , Silicon Valley's two largest companies, has been in the laboratory for more than a decade. Itanium is designed to excel at a sweeping array of advanced computing tasks, from solving grand scientific challenges to rendering complex graphics to slicing through vast databases. With more than 200 million transistors on each chip, it is designed to process data in big bites — 64 bits, in chipspeak — at blazing speeds.

But Google isn't buying. And that is an ominous sign for what is one of the longest-running and most expensive computing projects in history — exceeded only by I.B.M.'s bet-the-company gamble on its 360 mainframes, which eventually succeeded.

For Intel, Itanium's failure would be a painful black eye, a setback in its heavily financed assault on the corporate computing world beyond the personal computer. For its partner, Hewlett-Packard, the chip venture, if anything, is even more important. Exploiting the Itanium opportunity was crucial to the thinking behind Hewlett-Packard's $19 billion merger this year with Compaq Computer . If Itanium fails, it will be a severe blow.

And if Itanium flops, Silicon Valley's psyche may well be shaken, too. Projects like Itanium are the valley's equivalent of going to the moon. Big budgets, big egos and a near-religious commitment to the "right way" to design a computer are involved. With Silicon Valley mired in its worst recession, some technologists there say that Itanium may be the industry's last such huge bet on computer design.

Intel still says its commitment to Itanium is unwavering. Its smaller rival, Advanced Micro Devices , has an alternative to Itanium that computer makers are seriously considering. And Intel has a fallback project, called Yamhill, in case Itanium founders. But mainly, Intel is redoubling its bet on Itanium.

It has taken an entire decade, an estimated $5 billion and teams of hundreds of engineers from the two companies to bring the first Itanium chip to market. As the struggles and costs mount for the companies, skeptical technologists say Itanium now has the hallmarks of a bloated project in deep trouble. It is already four years behind schedule, emerging just as companies are in no mood to spend money on technology.

"Every big computing disaster has come from taking too many ideas and putting them in one place, and the Itanium is exactly that," said Gordon Bell, a veteran computer designer and a Microsoft researcher.

INCREASINGLY, Intel is facing the risk that it has chosen the wrong path to high-performance computing. It may have looked backward as it developed the microchip equivalent of the behemoth computers of the past.

Eric Schmidt, the computer scientist who is chief executive of Google, told a gathering of chip designers at Stanford last month that the computer world might now be headed in a new direction. In his vision of the future, small and inexpensive processors will act as Lego-style building blocks for a new class of vast data centers, which will increasingly displace the old-style mainframe and server computing of the 1980's and 90's.

It turns out, Dr. Schmidt told the audience, that what matters most to the computer designers at Google is not speed but power — low power, because data centers can consume as much electricity as a city.

If power efficiency does indeed trump processing speed, everything that Intel and Hewlett-Packard have done to pack raw power into the 221 million transistors of the new Itanium 2 could now be a handicap. The chip, which is as large as a silver dollar and whose 130 watts of power dissipation are enough to fry the proverbial egg, is not even a contender in the Google universe. "We're incredibly, incredibly power sensitive, and we've been talking to Intel about that," Dr. Schmidt said.

So far, Intel and Hewlett-Packard have been hard-pressed to prove they are on the right track. The Itanium was announced in 1994 as a joint effort to design a processor for the world of large computing systems, like servers, mainframes and supercomputers.

The project, however, has been beset by repeated delays. Originally planned to arrive in late 1997, the chip did not arrive commercially until last year.

Worse, the first version of Itanium, code-named Merced, proved to be an embarrassing dud — its performance trailing even Intel's own 32-bit Pentium chips, let alone the rival chips it is intended to beat, like I.B.M.'s Power series or Sun Microsystems' Ultrasparc 64-bit processors.

Itanium is Intel's effort to apply the economics of the personal computer business, with its lower costs of mass production and swift technological improvement, to the lucrative market for computer data centers of corporations and government. I.B.M. and Sun Microsystems, with their big server computers and 64-bit chips, are the leaders in the data center market — and the target of Intel and its partners from the personal computer industry, like Hewlett-Packard, Dell Computer and Microsoft.